DANIEL NENNI PAUL MCLELLAN F : ABLESS T T HE RANSFORMATION OF THE S I EMICONDUCTOR NDUSTRY Foreword by Dr. Cliff Hou, VP of R&D, TSMC A SEMIWIKI.COM PROJECT FABLE SS: The Transformation of The Semiconductor Industry DANIEL NENNI PAUL MCLELLAN WITH FOREWORD BY CLIFF HOU, VP OF R&D, TSMC A SEMIWIKI.COM PROJECT Fabless: The Transformation of the Semiconductor Industry Copyright 2013 by SemiWiki.com LLC. All rights reserved. Printed in the United States of America. Except as permitted under the United States Copyright Act of 1976, no part of this publication may be reproduced or distributed in any form or by any means, or stored in a data base or retrieval system without the prior written consent of the publisher. Authors: Daniel Nenni and Paul McLellan Editors: Beth Martin and Shushana Nenni ISBN: 978-1-4675-9307-6 BISAC: Business & Economics / General Fabless: The Transformation of the Semiconductor Industry Table of Contents Foreword ..................................................................................................iv Preface ......................................................................................................vi Chapter 1: The Semiconductor Century ............................................10 Chapter 2: The ASIC Business ............................................................21 In Their Own Words: VLSI Technology ......................................29 In Their Own Words: eSilicon Corporation .................................36 Chapter 3: The FPGA ..........................................................................44 In Their Own Words: Xilinx ..........................................................52 Chapter 4: Moving to the Fabless Model ..........................................64 In Their Own Words: Chips and Technologies ...........................68 Chapter 5: The Rise of the Foundry ..................................................71 In Their Own Words: TSMC and Open Innovation Platform .79 In Their Own Words: GLOBALFOUNDRIES .........................89 Chapter 6: Electronic Design Automation ........................................98 In Their Own Words: Mentor Graphics .....................................108 In Their Own Words: Cadence Design Systems ........................123 In Their Own Words: Synopsys ...................................................138 Chapter 7: Intellectual Property ........................................................153 In Their Own Words: ARM ..........................................................160 In Their Own Words: Imagination Technologies ......................168 Chapter 8: What’s Next for the Semiconductor Industry? ...........181 iii Fabless: The Transformation of the Semiconductor Industry Foreword Dr. Cliff Hou, Vice President, Research and Development, TSMC Semiconductor innovation has the power to change the world. Although, well over half a century ago, when semiconductors first came into being, few people really saw that promise. That power of semiconductors to innovate has stretched beyond its original applications. It also has changed how semiconductors are manufactured. Over the first 30 years of its existence, the semiconductor industry followed the proven integrated manufacturing model of the time. Those companies who owned the manufacturing assets made, marketed, researched and developed their own products. But then, the dynamics of innovation mingled with laws of supply and demand and a new concept—outsourcing—emerged and gave birth to what is known today as the dedicated foundry model, and the world has never been the same. Dr. Morris Chang is credited with identifying the innovation need and providing the resources to meet it. The need was making available manufacturing resources that are 100 percent dedicated to those emerging semiconductor companies that lacked the financial wherewithal to own their own expensive equipment. Like all great ideas, the premise was simple. What no one foresaw is that it would give rise to two, if not three, new industry segments, all of which contribute greatly to the innovative spirit of the industry today. When Dr. Chang established the Taiwan Semiconductor Manufacturing Company (TSMC) in 1987, the foundry segment and the fabless iv Fabless: The Transformation of the Semiconductor Industry semiconductor model were born. Today, fabless semiconductor companies—those companies who do not own manufacturing resources—are the fountainhead of innovation that is the foundation for our electronic world. The foundry segment has allowed these companies to invest in design and innovation rather than in manufacturing. As a result, innovation and the world economy have raced forward at an unprecedented pace. This has given nearly every semiconductor company the flexibility to innovate widely and creatively, constantly expanding the universe of products we rely upon today. Equally remarkable has been the rise of a powerful design ecosystem to complement the fabless industry. The ecosystem works in unison with designers and foundries to ensure that the IP, design tools, and services needed to get next-generation designs taped-out and in production are proven and ready to help customers meet their time-to-market goals. Today, the emergence of the fabless model, the dedicated foundry industry segment and an independent design ecosystem are driving the mobile revolution and will be the foundation of the internet-of-things. Even as this book was being written, the semiconductor industry continued to evolve. The drive to integrate the design and manufacturing links in the semiconductor value chain is now being extended downstream (to manufacturing equipment and materials suppliers) and upstream to major product companies. This is taking on the power of integration— virtual integration. Virtual integration is, by definition, the power of collaboration that blazes the direction and vision for the next generation of innovation. Innovation will always be the hallmark of the semiconductor industry and it is the theme that runs through this book. I’m honored and humbled to be part of this exciting industry and equally honored and humbled to offer my comments as the introduction to this book. Dr. Cliff Hou January 2014 v Fabless: The Transformation of the Semiconductor Industry Preface The purpose of this book is to illustrate the magnificence of the fabless semiconductor ecosystem, and to give credit where credit is due. We trace the history of the semiconductor industry from both a technical and business perspective. We argue that the development of the fabless business model was a key enabler of the growth in semiconductors since the mid-1980s. Because business models, as much as the technology, are what keep us thrilled with new gadgets year after year, we focus on the evolution of the electronics business. We also invited key players in the industry to contribute chapters. These “In Their Own Words” chapters allow the heavyweights of the industry to tell their corporate history for themselves, focusing on the industry developments (both in technology and business models) that made them successful, and how they in turn drive the further evolution of the semiconductor industry. Before we dive in, let’s define some terms. Rather than electronics, which refers to whole devices like your cell phone or TV, we’ll be using the terms chip, IC, ASIC, SoC, and FPGA throughout the book as we focus on the components that go into the devices. Chip or IC can refer more broadly to the two main types of semiconductor devices we cover: ASICs and SoCs (systems-on-chip), and FPGAs (field-programmable gate arrays). We have chosen not to cover many other electronic components vi Fabless: The Transformation of the Semiconductor Industry including memory, flash, mixed-signal technology, and micro-electro- mechanical systems (MEMS). We also talk about several phases of development in the semiconductor industry, and use the following terms to describe the companies and technologies that define a particular business model. IC: An integrated circuit, also called a chip, is a set of electronic circuits, including transistors and other components, on a silicon substrate. Systems company: A systems company makes a consumer product from chips that other companies have designed. Examples include Cisco and Apple. Semiconductor company: Also called integrated device manufacturer (IDM), these companies, like Intel and Samsung, design and manufacture standard ICs that systems companies use in their products. Until the mid- 1980s, all semiconductor companies were IDMs, that is, they controlled both the design and manufacture of their chips. This changed gradually, and now there are only a few (Intel and Samsung notably). All other chip makers outsource the manufacturing of their designs to a foundry. ASIC: Application specific integrated circuit refers to two things: a chip that is custom designed for a specific application, rather than for a general-purpose application, and to the type of company that developed in the 1980s that performed the physical design and manufacturing of these application-specific ICs for other semiconductor or systems companies. “ASIC” is now commonly used interchangeably with “IC.” SoC: A system-on-chip is an IC that integrates all components of a computer or other electronic system into a single chip. It may contain digital, analog, mixed-signal, and often radio-frequency functions—all on a single chip substrate. Fabless company: A company that designs their own chip but outsources the manufacturing to a third-party, either a pure-play foundry or an IDM that sells excess fab capacity. This is the prevailing business model today. EDA: Electronic design automation companies make the software that vii Fabless: The Transformation of the Semiconductor Industry is used to design all modern semiconductor devices. The three dominant EDA companies today are Synopsys, Cadence Design Systems, and Mentor Graphics. IP: Semiconductor intellectual property companies sell chip designs that are implemented in their customer’s ASICs, SoCs, or other semiconductor devices. A useful metaphor is that rather than selling a complete house, IP companies sell you the blueprint. The best known IP company is ARM. Foundry: A business that is a dedicated semiconductor fabrication facility that does not design its own ICs. The term “fab” refers to any semiconductor fabrication plant, whether run as part of an IDM (like Intel) or as a foundry (like TSMC). The economics of designing a chip and getting it manufactured is similar to how the pharmaceutical industry gets a new drug to market. Getting to the stage that a drug can be shipped to your local pharmacy is enormously expensive. But once it’s done, you have something that can be manufactured for a few cents and sold for, perhaps, ten dollars. ICs are like that, although for different reasons. Getting an IC designed and manufactured is incredibly expensive, but then you have something that can be manufactured for a few dollars, and put into products that can be sold for hundreds of dollars. One way to look at it is that the first IC costs many millions of dollars—you only make a lot of money if you sell a lot of them. What we hope you learn from this book is that even though IC-based electronics are cheap and pervasive, they are not cheap or easy to make. It takes teams of hundreds of design engineers to design an IC, and a complex ecosystem of software, components, and services to make it happen. The fabs that physically manufacture the ICs cost more to build than a nuclear power plant. Yet year after year, for 40 years, the cost per transistor has decreased in a steady and predictable curve. There are many reasons for this cost reduction, and we argue that the fabless semiconductor business model is among the most important of those reasons over the past three decades. viii Fabless: The Transformation of the Semiconductor Industry The next chapter is an introduction to the history of the semiconductor industry, including the invention of the basic building block of all modern digital devices, the transistor, the invention of the integrated circuit, and the businesses that developed around them. ix